Bitcoin’s Market Dominance Nears 50% for the First Time in Five Months
Bitcoin has rallied more than $1,100 from its December low, but its share of the overall cryptocurrency market has fallen to roughly half. If history is any indication, this is a potentially bullish sign for digital assets.
Cryptocurrencies as a whole have added $47 billion in value over the past nine days, sending a strong signal that the market has set a firm price bottom. The combined market cap of all assets reached a low near $100 billion on Dec. 15. It has since recovered at $147.1 billion.
Those highs seen Monday were accompanied by a sharp rise in trading volume, contrasting sharply with traditional financial markets, which tend to exhibit reduced activity during the holidays. Exchange-based volumes reached $24.5 billion in the last 24 hours, according to latest available data.
Bitcoin kick-started the recovery on Dec. 17, the one year anniversary of its record run, opening the door to a much wider corrective rally. As the following snapshot illustrates, seven-day returns among top-20 coins (excluding USDT) range from 24% to a whopping 135%.
The surge in altcoins and tokens has diminished bitcoin’s dominance, which currently resides at 50.4% of the overall market. That’s the lowest level since August. Bitcoin’s dominance rate declined sharply during the height of the bull market in early 2018 before rising again during the downtrend. It has held above 50% for the past five months as investors cut ties to riskier altcoins (see below).
Observers of the last great crypto bull market witnessed a gradual decoupling of bitcoin and its much broader altcoin peers. While bitcoin’s influence over its competitors is undeniable, price independence between and among the asset classes is a sign that the market is moving beyond its primitive phase. Based on this observation, the decoupling process is necessary for the health of the cryptocurrency ecosystem in the long term.
That being said, this view must also consider the hundreds of altcoin projects that have failed to make headway since their initial coin offering (ICO). The market downturn has exposed many of these projects and forced a consolidation of sorts into assets that have a demonstrated utility. Hacked covered this topic in the following article from August: The Long-Awaited Altcoin Extinction Event May Be Near.
Several prominent voices from within the blockchain ecosystem have called for the disappearance of at least 90% of altcoins and tokens currently ranked on CoinMarketCap. These prognosticators include Xapo President Ted Rogers and Vitalik Buterin, Ethereum’s co-founder.
At the time of publication, there were 2,067 cryptocurrencies tracked by CoinMarketCap.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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